Landlords enjoyed an average total return of 20pc on investment properties during 2003, according to figures published by buy-to-let specialist Paragon Mortgages.

This means that an investment property bought 12 months ago in the UK for an average price of £110,120 made a return of £22,137.

But some regions, including the North, exceeded that figure.

The South-west saw a huge 37pc return, 32pc in the North-west and 25pc in the North and East Anglia.

John Heron, managing director of Paragon Mortgages, said: "Landlords had a very good year in 2003 with their overall returns outstripping most other forms of investment.

"The average total return is more than 20pc, while in some regions it is significantly higher."

Figures for December show house prices paid by landlords slipped from the peak seen in October 2003 to £123,372 as they took advantage of a slower property market in the run up to Christmas to purchase properties at more competitive prices.

As a result, for the first time this year, house price inflation on buy-to-let properties has fallen behind that of the housing market as a whole.

Prices paid by investors for property at £123,372 are 3.1pc down from October.

Mr Heron added: "Landlords tend to be astute property purchasers and they take advantage of any dips in prices to achieve a good deal and make shrewd investments.

"As a result we're starting to see a lower rate of inflation on landlord property values than in the market as a whole."

Figures for December reveal that the average rental yield - the rate of return on an investment - stood at 7.37pc, down from 8pc in December 2002.

The highest monthly yield was in the North with 9.1pc on an average property worth £57,087.

The North-west came second with 8.76pc on £82,150.

The lowest yielding regions in the country continue to be in more expensive areas in the South, with Greater London (6.5pc on £225,079) and East Anglia (6.7pc on £112,320) propping up December's table.

Mr Heron added: "It's been a good year for landlords and prospects for 2004 are good as well.

"They expect an 8.8pc increase in their property portfolios by the end of this year, driven by sustained tenant demand."